Thursday, April 11,$Apple (AAPL.US)$The stock price experienced a sharp rise in recent times, closing up 4.3% and increasing the market value by 112 billion US dollars in a single day.
At a time when Apple has experienced a series of disadvantages since the beginning of the year and its stock price is in trouble, some Wall Street analysts such as Bank of America and J.P. Morgan Chase bucked the trend and were optimistic about the company. On the same day, it was reported that Apple is planning a major upgrade so that Mac computers will be equipped with the next-generation M4 chip. The support for artificial intelligence (AI) functions will become the highlight of the M4. Related news all boosted Apple's stock price for the day.
Bank of America: Investors have once again underestimated Apple's gross profit margin
Bank of America analyst Wamsi Mohan said in the latest report released on Thursday that investors have once again underestimated Apple's gross profit margin. “We believe Wall Street is once again underestimating Apple's long-term gross margin potential in products and services. We expect the gross margin of the Apple product segment to rise by about 180 basis points in the next few years, and the gross margin of the service segment to rise by about 150 basis points.”
Mohan pointed out that the current market undervalues Apple, and similar situations have occurred before. In 2018, Wall Street predicted Apple's gross margin of 39% in 2023, but in fact, in the end, Apple surpassed this forecast. The gross margin reported last year was as high as 44%.
This year, due to the slowdown in iPhone sales, Apple's profit engine, and difficulties in integrating artificial intelligence into products and services, the company's stock price once fell 13% year to date. However, along with Thursday's sharp rise, by the close, its share price decline had narrowed to about 9% during the year.
Looking ahead, Mohan expects vertical integration and product portfolios to bring more than 100 basis points of upward space to Apple's gross margin. He also predicted that Apple's use of its own internal modem could increase the gross margin of the product by 110 basis points, and that the gross margin of the iPhone is expected to increase by 160 basis points.
At the same time, Apple can reduce costs by creating its own data center chips and using its own chips in the data center, so that the gross margin of the service portion can obtain 100 basis points of upward space.
Mohan believes that serving Apple's high-profit business as a growing share of the company's total revenue can increase the gross profit margin by 60 basis points. Furthermore, pricing is another way Apple can further increase gross margins.
J.P. Morgan: Hedge funds are eager to try it out
Samik Chatterjee, an analyst at J.P. Morgan Chatterjee, another major Wall Street bank, also affirmed Apple. He also believed that investors underestimated Apple, while pointing out that market sentiment showed some signs of improvement.
Chatterjee said that since the launch of 5G phones, Apple's valuation premium has been at a low level. Furthermore, the rise of artificial intelligence and its role in the next-generation iPhone upgrade cycle has aroused investors' interest.
Chatterjee explained that in contrast to the deterioration in the fundamentals of hardware demand and service growth prospects, interest in Apple stock has improved among investors who are generally wary of premium valuation multiples, even though Apple's growth prospects are one of the lowest compared to other big tech stocks.
Chatterjee revealed that hedge fund investors' enthusiasm for opportunities in the AI upgrade cycle continues to heat up. Hedge funds are watching the downsides to find more favorable entry opportunities before the AI upgrade cycle arrives. At the same time, he mentioned that although there are still some questions about whether the relevant upgrade cycle will be implemented in the iPhone launched later this year or in 2025.
Apple is preparing to upgrade the most powerful 3nm chip for all Macs
According to recent news, it has only been five months since the M3, the 3 nm (nm) chip equipped with the world's first personal computer, was unveiled, and Apple is planning a major upgrade to allow Mac computers to be equipped with the next-generation M4 chip. The support for artificial intelligence (AI) functions will become the highlight of the M4.
On Thursday, the media quoted people familiar with the matter as saying that Apple is preparing to completely transform the entire Mac product line with a new self-developed processor designed to highlight AI, and is currently close to producing M4 chips with AI functions. Apple's goal is to release multiple M4-equipped Mac computers from the end of this year to the beginning of next year, including the new iMac, the low-end 14-inch MacBook Pro, the high-end 14-inch and 16-inch MacBook Pro, and the Mac mini.
Financial indicators reflect Apple's price-performance ratio
According to data compiled by the media, Apple's current expected price-earnings ratio is about 24 times, lower than Microsoft and similar companies, and even cheaper than the Nasdaq 100 Index, which mainly focuses on technology stocks. Along with Apple's contrarian decline in large technology stocks since the beginning of the year, in the opinion of some people, the cost performance ratio has already been shown.
Some investors are upset about Apple's undervaluation, saying that McDonald's market sales ratio is actually higher than Apple and Google. This is very unreasonable. This can be said to be a microcosm of the hedge fund investors revealed by the J.P. Morgan analysts mentioned above.
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